Disease dictates prices
AS THE African swine fever outbreak continues to spread across the globe, Australian producers may experience a higher demand for proteins from overseas markets.
Market analyst for MLX Pty Ltd, Simon Quilty, said Australian beef shipments to China increased by 50 per cent last year, fuelled by the disease, and this was expected to climb rapidly, kicking up prices by 4 per cent this year. He said it would also impact Australian lamb and mutton exports into China.
Mr Quilty described the outbreak as “unstoppable”, having the capability to change the global balance sheet for beef, pork, chicken, lamb and mutton for up to 20 years.
He said Chinese consumer demand for pork had fallen 14.4 per cent and this would equate to 8.34 million tonnes over a year should this continue across China, resulting in a tightening of global protein prices.
“Pork, beef, lamb and mutton prices will impact your farms for the next 10 to 20 years,” he said.
“A 1kg shift in per capita consumption from pork to beef in China equates to 1.4 million tonnes, or Australia’s entire global beef exports for 2018.
“Global beef prices will rise this year by 4 per cent, with China being the main driver of this.”
However, a report by Meat and Livestock Australia said African swine fever was unlikely to be the driver behind increasing beef and lamb exports to China.
According to the report, over a 12 month period ending October 2018, Australian beef and sheepmeat exports to China had increased 53 per cent and 47 per cent respectively (in contrast, total exports to all markets had increased 10 per cent and 13 per cent for the respective proteins).
Meanwhile, beef exports from Brazil, Argentina and Uruguay increased 47 per cent, 112 per cent and 10 per cent respectively over the 12 months ending September 2018.
“At the core of this strong import growth is a swelling class of consumers that can afford to eat an increased volume and quality of red meat, along with the inability of the domestic industry to meet this demand, particularly for meat of the highest quality and food safety standards,” the MLA report said.
“Given the timing of the ASF outbreak, it’s unlikely to be a driver of the growth in the beef and sheepmeat trade throughout 2018.
“For instance, pork imports, where the market would first react, have failed to significantly increase. In reality, Brazil regaining access to China in 2015 and Argentina liberalising exports in 2016 have played a far greater role in supporting growth of China beef imports to-date.
“However, if the disease continues to spread and culling puts a large enough dent in production, or confidence is rattled enough for some to reduce domestic pork consumption, there will be increased demand for imported meat protein.”
The MLA report indicated “given price points and ability to substitute, pork shortfalls will likely be first reflected in the poultry and imported pork markets.”
“While the strongest waves will be felt in the pork and poultry markets, if the impact is big enough it will have ripple effects for beef and sheepmeat.
“The imported beef market in China has increased more than three-fold in four years (sheepmeat has recorded similar growth when compared over a seven-year period) due to underlying demand fundamentals that may slow but are not expected to reverse.
“While the magnitude, duration and impact of the outbreak is still unclear, ASF may only add further fuel to this growth.”
Around 22 million pigs are estimated to have been slaughtered on the back of 105 confirmed outbreaks in China to February 15, 2019, with the national herd falling by 5 per cent in December compared to the previous January estimates.
The disease was first diagnosed in China on August 3, 2018, and was believed to have originated in Russia.
ASF is spread on the hoof and also in the processed, frozen or cooked product which has seen the disease spread rapidly due to waste product fed by backyard pig operators. Affected pork requires cooking at over 70 degrees Celsius for more than 30 minutes for the disease to be no longer effective.
❝beef, Pork, lamb and mutton prices will impact your farms for the next 10 to 20 years.
— Simon Quilty